There are several reasons, in my opinion, and none of them are very pretty. Between government and lenders and stupid people, there is enough blame to go around to everybody.. Some just blame the Lenders, but that is just not fair. Its the easy way out, actually.
Most of us have bought a home, and met with a Lender. The lender then goes over all of the options that are available to you, and which one fits the best. But, when buyers were told about ARM mortgages, that start at such a low interest rate, they can buy more of a house. A more expensive house, than they could of bought on a 30 year fixed mortgage. So, as the housing market was chugging along, with homes going up almost 10% in value per year, people figured they didnt have anything to lose.
These buyers were told that the rate could jump up later on in the years. As a retired Realtor, I can assure you that they were warned. They have to sign papers that have been clearly spelled out. But with the housing market skyrocketing, they assumed they could remortgage later on and be fine. What they didnt anticipate was that home prices would crash. Now they cant refinance because the house wont appraise at the value they owe.
Investors that had to put 20% down, cant even sell the properties for what they owe. The government has made it hard to be a landlord anymore. The courts too, which all too many times, seem to side with the renters that skipped paying their rent, than to the landlords, which are not all a bunch of rich guys trying to screw the renter. The government and the press want you to believe that, so that you dont feel sorry for the landlord that just got shafted out of 3 months or more of rent, before he could evict the freeloaders.
I have heard some nightmare stories, and just recently, about someone I happen to know. Her home is in foreclosure and shes taking everything she can, including the kitchen cupboards. Renters that face eviction have poured cement down the toilets to get even with the landlords..get even for what? In both scenerios, the renter and the buyer did not pay the rent or the house note. But lets get even anyway, and ruin the place.
Investors are bailing out also, because when you have to make that payment, along with higher taxes on the property to begin with, (35% higher than a homestead property), plus the 20% down, even they cant sell it for what they owe anymore. They try to wait it out, and let the values start to increase once again, but when people dont pay rent, its easy for the average JoeLandlord to get behind on that property also. So, to protect their own home, they are also letting the rental go back to the bank.
Now, we hear the government and the morons on tv telling lenders to freeze the interest rates. Charlie Gibson had the audacity to ask why are the lenders raising the interest rate, when they know people cant pay it? I dont think Ive ever seen such a stupid question in my life. Its called a contract, Charlie. Plain and simple. And for that stupid question, you should lose your job. You cant selectively enforce a contract, on either side. Real Estate class 101, Charlie..learn it before you spew it.
Too many people bought way too much house, took a gamble on an ARM (adjustable rate mortgage) and some refinanced all the equity out of the home. Now they are worth considerably less, and they cant sell them. They owe more than they are worth. Yes, I realize that I was a Realtor, and I have a bit more knowledge than most, but most should of seen that property values couldnt keep going up like they were. Sooner or later the markets would have to correct themselves and they did.
So, now the government expects everyone else to bail out these buyers, with our money that we are forced to pay in taxation. Instead of letting the market adjust, they want to "fix it". Except that it is not fixable. Even if they bailed all of these people out, it will just delay the problem. And it is not up to the government to take my money and pay someone else's house note. Every time you do something stupid, there is a price to pay.
I still have my own mortgage to pay. Why should I pay for someone that didnt pay theirs? That is what the school of hard knocks is all about. You can rest assured that these people will never do that again. Hopefully anyway. If we bail them out with a free ride, they will surely do it again, since there is no consequence to their actions.
Maybe we should ask the government to lower property taxes! That will bring down the payment, instantly! Maybe we should force the government to remove all the garbage they put in our property taxes. Times are tough, if we have to cut back so should they. Make a rental home the same as a regular home, and lower their taxes. Quit making the suburbs pay for Detroit community colleges, and buses. Quit charging us outrageous fees for water. Eliminate the Michigan Income Tax. Eliminate hidden taxes on gasoline and alchohol and cigarretes, and just about everything they can get their hands on to tax.
If you really want to give us a break, give it to all of us. Not just a select few. Cut back on government employees. Get rid of most programs that not only do not work, but suck us dry of our money for nothing. Dont blame the lenders, they didnt do this to the people. The people did it themselves. They took a gamble, and they lost.